Sullivan & Cromwell Partners reported on the October 16 decision from the U.S. Court of Appeals for the Second Circuit which overrules the controversial 2002 decision in Winter Storm Shipping, Ltd v. TPI. Winter Storm Shipping, Ltd v. TPI dealt with havoc wreaked upon the administration of hundreds of electronic funds transfers passing through intermediary banks in New York every day. This Court of Appeals decision, which was pursued by the New York banking community, is significant in that it will significantly strengthen New York's standing as a key center for international fund transfers and bolster the U.S. dollar as the currency of choice for international business transactions.
In Winter Storm, the Court held that electronic funds transfers at an intermediary bank were property of the originator of the funds transfer and could be attached under Maritime Rule B. In Shipping Corp. v. Jaldhi, the issue was whether the Winter Storm holding should be extended to transactions where the defendant was the beneficiary of the transfer, as opposed to being the originator. The parties to the appeal split, of course, on that issue. The Clearing House opposed extending Winter Storm, and also asked the Court to overturn Winter Storm, which they did.
In reaching its decision, the Appeals Court noted that since the initial Winter Storm decision in 2002, New York banks have been required to process a “staggering number” of maritime writs every day and that the associated lawsuits filed by maritime plaintiffs under that decision, seeking to attach over $1b, represented 33 percent of all lawsuits filed in the Southern District court from Oct. 1, 2008 to Jan. 31, 2009 alone.
Sullivan & Cromwell partners Bruce Clark, H. Rodgin Cohen and Michael Wiseman, along with associate Laurent Wiesel, represented The Clearing House Association L.L.C., comprised of leading banks from the New York commercial banking industry, amicus curiae in the case. Please feel free to contact us for additional information about the decision or to discuss the ramifications this decision will have on the U.S. international fund transfer business.